ciation of furnishings, such as china, glass, cutlery, silver, linens, etc. These may be reappraised at periods when statements are prepared or depreciated at such times at adequate rates. Another good method is to credit regularly a reserve account and charge against the profit and loss account amounts sufficient to cover the estimated actual renewals and depreciation over a period of years, and then to charge all renewals to this reserve

account.

RESTAURANTS

The accounts of restaurants are somewhat similar to those used in hotels and clubs, although, by reason of restaurants having fewer departments, the records are not so complex. It is a difficult matter to safeguard the proprietor against all possible fraud and to discover if any has been perpetrated. The auditor should, however, carefully investigate the manner of serving meals and collecting therefor, and should ascertain that the earnings and expense accounts in the general ledger are so classified that the proprietor can form an opinion as to the efficiency of the management.

In some restaurants the waiters do not issue checks to guests, the checks being issued by a checker at the kitchen door, who scrutinizes the food or drinks served, and who also charges the waiter's account on a columnar checking sheet, which is used as a check at the end of the meal periods against both the waiters and the cashier.

ADVERTISING AGENCIES

It is important for the auditor of an advertising agency to ascertain that the accounting system in use embraces a good internal check on the actual advertising done, on the credits to publishers therefor, and on the charges to the clients for the advertising and commissions, and that the system is actually being carried out in practice.

A good system will provide for the charges to the clients (for the advertising and commissions), the credits to the publishers (for the value of space occupied in their periodicals), and credit to the agency's commission account to be made in one entry from the same original data. If a "space" account is carried in the agency's general ledger and is used as the medium through

which the charges to the clients and the credits to the publishers are made, the auditor should ascertain that the balance therein consists of the aggregate value of specific advertising not yet charged to the clients, but credited to the publishers, and of specific advertising not yet credited to the publishers, but charged to the clients.

The contracts of the agency with the publishers of periodicals and with the clients should be examined, and the rates for advertising and commissions should be compared with the agency's records to ascertain that the credits to the publishers for space and the charges to the clients for advertising and commissions are being correctly made.

THEATERS

The auditor of theatrical accounts must at once recognize the fact that a cash system alone prevails and that all persons connected with the financial part of the management necessarily handle this currency. It is a matter of regret that managers cannot be induced to make payments by cheque more generally, but up to the present representations and arguments presenting the advantages of such a system have not been favorably received. However, the practice is increasing gradually, and in time, it is to be hoped, may become general.

While nearly all receipts are in currency, it is not usual for the auditor to be expected to verify such receipts; this is a function for the treasurer, who is considered sufficiently responsible for a service that demands integrity, but no great technical knowledge or unusual ability.

The methods followed in keeping theater accounts are as follows: About half an hour after the beginning of each performance the treasurer of the theater counts his unsold coupon tickets, making up a "rough" statement of the cash which should be on hand; to this he adds the proceeds of sales of "hard tickets" (general admission and exchange), and then submits this statement to the treasurer of the company. The two treasurers then count the tickets contained in the doortenders' boxes, which, except in stormy weather, agree very closely with the rough statement. Following the count the theater treasurer makes out a final statement, which is signed by both treasurers.

A "settlement sheet" is made up at the end of each week by the theater treasurer showing the gross receipts and the share of same due to the theater. Any additional earnings are added thereto, and after deducting the salaries and petty expenses, the treasurer pays the remainder in currency to the manager. The latter usually pays all advertising, bill-posting, light, etc., about Tuesday of each week to cover the previous week. In some theaters the treasurer pays all bills and settles with the manager for the profit or loss shown by the weekly statements only, but this is not a common practice.

The treasurer of the theater also prepares a complete weekly statement for the company treasurer and settles therefor. After making these two settlements he would have on hand only the receipts of the "advance ticket" sales, which latter, as elsewhere considered, should be verified.

It is well to remember that the object of theater bookkeeping is to show the result of each week's business in a manner that will determine which attraction pays best. Such items as annual license fee, rent, repairs, etc., should, therefore, be apportioned weekly on a basis of a season of thirty or thirty-five weeks.

The procedure in an audit of theater accounts should be somewhat as follows:

Deduct the number of coupon tickets on hand from the total capacity of the house; find how many "hard tickets" were furnished the treasurer at the beginning of season, deduct number on hand at time of balancing, and the remainder should be accounted for in cash. The total result should then agree with the cash and vouchers in the hands of the treasurer.

It is necessary to see that all nightly statements of the period under review are signed by the treasurers of the companies. A check on the proper division of receipts may be had by examination of the contracts. These will also enable the auditor to know that the proper shares of extras have been collected from companies. He should also inquire into the manner of preparing pay rolls, in connection with which reference to an attendance book will be necessary. This book records the names of persons entering the premises by the stage door before a performance, and from it fines for absence or lateness are determined.

As both the treasurer and his assistant have access to the

same cash, it will readily be seen that a difficulty obtains in dividing this responsibility; and a similar difficulty arises in connection with the weekly payments to the manager. After making settlement with him, the cash remaining represents the advance ticket sales, which needs to be verified at the time. However, managers seldom count a large number of tickets, and just here more than one defalcation has been covered up or carried along by using advance sales to conceal shortages.

Strip tickets used largely by "vaudeville" or "continuous performance" houses are, of course, easily counted.

THEATRICAL COMPANIES

A treasurer's cash book is the basis of the accounts of a theatrical company; it should be balanced weekly, at least. From it several accounts as here classified (known as "Production" accounts) are built up. These include:

Preliminary Expenses: Incurred during rehearsals, such as salaries of manager, musical director, and orchestra, hall rent, typewriting parts, etc.

Properties: Including almost everything used in the stage representation other than scenery, costumes, or electrical apparatus, such as furniture, draperies, animals (either papier mâché or alive), flowers, etc. Perishable articles should, of course, be absorbed in current expenses and not charged to properties.

Costumes: Covering clothing, shoes, wigs, etc.

Electrical Apparatus: In this item are included calcium lights and special devices. If the electrical equipment is rented instead of being owned, the rental is chargeable to current expenses.

Scenery: The work of building and painting is usually done under contract. The scenery may be built by one firm and painted by different artists. A difficult landscape would probably be done by a high-priced artist, but the painting of a simple interior would be done by a cheaper man.

Vouchers representing expenditures for the foregoing items should be examined. In addition, an audit would include the verification of receipts by comparing them with the nightly statements signed by the house treasurer; and also seeing that the fines imposed by the stage manager are accounted for. The

company's earnings statement is made up weekly to agree with the theater accounts.

Owing to the uncertainty of the outcome of theatrical productions, definite rules for the treatment of depreciation cannot be stated. The whole cost of an unsuccessful production should be written off forthwith; on the contrary, the copyright of a successful play does not depreciate rapidly in value. In New York the total cost of production is written off against the first year's business. This is obviously the safest practice.